Did you know there is a product that allows you to invest in stocks and shares without having to pay any tax on your profits? Today, I’m going to show you a fascinating way to invest in stocks tax-free in 2021.
If you are new to long term purchases of stocks you may have mistakenly assumed that this involves paying tax on your profits.
It’s not only Spreadbetting
Many traders and spreadbetters out there in the UK instead choose to use the spreadbetting vehicle to gain these benefits. This is because it falls under UK Gambling laws, meaning that your profits are not subject to capital gains taxes. Yet thousands of investors are also enjoying tax-free profits from their long term stock purchases every year.
A Stocks and Shares ISA allows you to invest in stocks tax-free. It’s completely free from UK income and capital gains tax. So you can make investment choices without worrying about how it may be taxed. You also don’t need to declare your profits on any tax return.
The Tax-Free Limit
As of the 2020/21 tax year (April 5th 2020 to April 6th 2021) the limited amount you can put into a Stocks and Shares ISA is £20,000. Any profits made from this £20,000 is tax free, forever.
The exciting part of this is you can then invest another £20,000 the following tax year. (Subject to any changes made to the UK tax laws which are constantly changing).
That next year any profits you make from the first £20,000 and the following £20,000 are all still tax-free.
This is more than adequate for the majority of start-up stock market investors. Most beginners are probably adding less than the £1666 a month they would be limited to adding.
And just because it’s an ISA, it doesn’t mean that your capital is tied up. In a Stocks and Shares ISA, you can withdraw your funds at any time without penalty. (Other than the usual transactions fees for selling any positions you may have outstanding).
A Stocks and Shares ISA specifically allows you to pick and choose which stocks to invest in. Perfect if you are part of my membership group and are getting access to my weekly watchlist reports.
Are you interested in opening up a Stocks and Shares ISA this year? If so, be sure to check out my post on The 3 Best Stocks and Shares ISA Providers in 2021.